The trend is the idea that a Board of Directors should effectively pay greenmail to a departing Director in order for him/her to shut their mouths and go away.

We first saw this last year with small holding Infusystems (INFU) where a Director was effectively paid to leave because they were considered to be “disruptive.” Disruptive in this case was seemingly going to Board meetings and raising their hand and asking, “what the hell are we doing spending money on scheme after scheme to add adjacent capabilities and seeing zero return?” I wasn’t there but I can be a damn good guesser. The departing Director was PAID to leave the board and enter a standstill. This was arguably the worst governance I have seen in…a really long time. There will be further developments here going forward if you are asking – the core infusion business is worth more than the price of the stock–and the CEO just resigned.

But our topic today is American Vanguard(AVD), which has recently become our largest position. This is not going to be a 90 page PowerPoint, other than to say, yes the 10-K will be out shortly(mostly whining about timing of “when” involving goodwill write offs), there is a new CEO whom we like, and there is no awful reason other than weather why this company shouldn’t be doing 10% Ebitda margins ands sell at a ten multiple. And the debt is seasonal, so use a rolling LTM to rolling LTM Ebitda.

Eric Wintemute is a nice guy, but clearly has a bitter side that is bordering on childlike. He ran the company to nowhere for 2 decades(family) and finally was persuaded to go last year after a bitter proxy fight. But like a stubborn case of athlete’s foot, gone is apparently not gone. He seems to have nominated himself to go back on the board, and was just paid money by the Board to go away. Not “a lot” but enough that should really annoy people. Ignoring a dismal track record specific to Eric, there is little worse, in my opinion, than for an ex-CEO to sit around the Board with raised eyebrows and second-guess the new guy. And NOTHING is worse than trying to fight your way back onto the board with a proxy fight, which you would have ZERO chance of winning. If you recall, Eric, the Cruiser Capital activist slate in 2022, which you fought hard with shareholder money, was elected with arguably the biggest landslide I have ever seen.

The Board of AVD? I completely get the concept, sort of. There is a new CEO in the midst of an “operational transformation,” half the board is new– why in God’s name do we want to deal with this and take focus off the mission? Pay the bitter man and let’s get on with life. And that is always the advice of legal counsel in our fine country– pay and make it go away, because the fight could be more expensive.

But it remains irksome. And more prevalent. Go take a long vacation, Eric.